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Australia – New Transitional Regime For Amendments To BCIPA.

27 November, 2014

 

Legal News & Analysis – Asia Pacific – Australia – Construction & Real Estate

 

As noted previously, significant amendments to the Building and Construction Industry Payments Act 2004 (Qld) (Act) were passed in September 2014.


On 26 November 2014 Parliament revised the transitional arrangements. From commencement, the amendments will apply to any new payment claim, regardless of when the contract was entered in to. We understand the amendments will come into force in December 2014.

 

 

What You Need To Know

 

  • When the changes will apply to you:
    • for a payment claim served before commencement, where there are no “outstanding matters”, the unamended Act will apply.
    • for a payment claim served before commencement, where there are “outstanding matters”, the transitional version of the Act will apply.
    • for a payment claim served after commencement, the amended Act will apply.
  • How the annual Christmas shut-down will affect you: for the purposes of the transitional version of the Act and the amended Act, the extended industry shutdown between 22 December and 10 January will be excluded from the calculation of time under the Act.
  • Which category of payment claim has been made and how long you have to respond: the amended Act introduces two categories of claims. A respondent has longer to respond to a “complex” payment claim than a “standard” payment claim. There is also a further extended period to deliver a payment schedule where a complex payment claim is served 90 or more days after the reference date.
  • Where adjudication applications must be lodged: following commencement, all adjudication applications will be lodged with the Queensland Building and Construction Commission (QBCC).
  • When will these changes come into force? The amended Act is yet to be proclaimed, but it is anticipated that it will commence in early December.

What You Need To Do

 

  • If you are negotiating a construction contract: if you in the process of documenting a new construction contract, you should consider what changes will need to be included to give effect to the amended Act. You should pay particular attention to the terms of the payment provisions.
  • Review staff education and training: it is important that both procurement and contract administration staff are aware of the changes and how to take advantage of them. For example, the longer timeframes for responding to a complex claim do not apply automatically and contracts will need to adopt them.

Extensive Changes Introduced


The underlying premise of the Act has not changed. As the Honourable Mr Mander MP noted when tabling the Bill, “the intent is to ensure that a person is entitled to receive and is able to recover progress payments when they undertake construction work under a contract or to supply related goods and services under a construction contract.”

 

The amended Act however, goes some way to striking a more equitable balance between the claimant’s right to cash flow on an interim basis and the respondent’s right to understand the claim put against it and having enough time to respond.


This is achieved by introducing longer timeframes for responding to complex payment claims and reducing the time after the work was completed that a claimant can submit a payment claim (now 6 months). The key timeframes you need to know are set out in the table below on page 4.


Key Changes Since Our Last Update


Transitional Regime Has Dramatically Changed


Initially the amended Act indicated that (with the exception of the abolition of the ANAs and transfer of those functions to the QBCC registry), the amended Act would only apply to construction contracts entered into after commencement.


However, on 26 November 2014 the transitional regime in the amended Act was rewritten. The effect of the changes are that for the most part, the amended Act will apply to all construction contracts, old and new.


The transitional regime now provides:

 

  • for payment claims served before commencement, where there are no “outstanding matters”, the unamended Act will apply.

 

The unamended Act means the Act as in force immediately before commencement. In this category all matters relating to that payment claim have been concluded.

 

  • for payment claims served before commencement, where there are “outstanding matters”, the transitional version of the Act will apply.
 

The transitional version of the Act means the unamended Act as amended by a number of specific provisions in the amended Act, including:

 

    • those relating to the transfer of adjudication functions to the QBCC registry;
    • new provision giving claimants an express right to withdraw an adjudication application; and
    • new definition of business days. (The effect of this is addressed further below.)

 

This category will apply for only a short period of time, until all matters relating to payment claims served shortly before commencement are completed. The transitional version of the Act does not adopt the longer time frames for response.

 

  • for payment claims served after commencement, the amended Act will apply in its entirety.

An outstanding matter is any incomplete step that is to taken under the Act in response to a payment claim, such as giving a payment schedule, making an adjudication application or giving a adjudication response.


Time For Submitting A Payment Claim After The Work Has Been Completed


The only specific provision for construction contracts entered into before commencement, is that for the first 6 months of the operation of the amended Act, a claimant may serve a payment claim up to 12 months after the work was completed. After that transitional period, payment claims under all construction contracts (regardless of execution date), may only be made within 6 months after the work was completed.


Other Changes


As highlighted in our September alert after its introduction into Parliament, the Bill was referred to the Transport, Housing and Local Government Committee (Committee) for further consideration. In response to the Committee’s report and submissions received by the Committee, some significant issues in the Bill were addressed in the amended Act, including:


Definition Of Complex Payment Claim Was Simplified.

 

A complex payment claim is now determined only by its monetary value (more than AUD 750k ex GST), rather than by whether the payment claim involves a time-related element or a latent condition claim.


Requirement To Identify Standard Or Complex Claim Was Removed.

 

Given the simplified definition of complex payment claim, it is thought that it will now be clear whether a claim is a standard or complex payment claim. Accordingly it is no longer necessary for a claimant to identify which category of payment claim it has submitted. The penalties for incorrectly identifying a payment claim as standard when it was complex have also been omitted from the final version.

 

Discretion To Set Aside The Whole Or Any Part Of Adjudicator’s Decision Preserved.


Submissions were made to the Committee that the proposed s100(4) limited the available remedies of the Supreme Court when it is called upon to review decisions of an adjudicator. The amended Act provides that the Court has discretion to identify the part of a decision affected by jurisdictional error and set it aside, but allow an unaffected part to remain binding on the parties.

What About My Christmas Leave Plans?


Under the unamended Act, 27 to 31 December each year are not “business days” for the purposes of calculating time periods under the Act.


To more realistically reflect the period of industry shut down over the Christmas and New Year period, the amended Act provides that 22 December to 10 January of each year are not “business days”.


The explanatory notes for the new transitional regime notes the change “will save the problem of dual systems for new and existing contracts and reduce red tape. It will also eliminate the problem of jumping between different definitions of business day for existing contracts.


Will I Automatically Have Longer To Respond To Complex Claims?


No. The longer timeframes for responding to complex payment claims do not automatically apply.


As noted above, if the parties agree a shorter time than 15 business days for payment or giving a payment schedule under their contract, then, despite the amendments, that shorter time will be the time for responding to the complex payment claim.


It is for this reason that you must carefully review construction contracts yet to be executed and be prepared to negotiate the longer time for responding to payment claims with your contract counterparts.


But Wait, There’s More!


The QBCC has recently published its “Better Payment Outcomes” Discussion Paper.
The Discussion Paper seeks industry comment on issues such as whether Queensland should introduce a Construction Retention Trust Scheme or whether adjudicators should be permitted to decide the release of a valuable security instrument.


The QBCC is currently conducting state-wide industry seminars and has invited submissions on the Discussion Paper.

 

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For further information, please contact:

 

Jeremy Chenoweth, Partner, Ashurst
jeremy.chenoweth@ashurst.com

 
Joanna Jenkins, Partner, Ashurst
joanna.jenkins@ashurst.com

 
Mark Disney, Partner, Ashurst
mark.disney@ashurst.com

 
Louise Young, Ashurst
louise.young@ashurst.com

 

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